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Saturday, March 30, 2013

Tips For First-Time Home Buyers

By Alex Matjanec

Though many homeowners are shaking their fists at the current housing market, this much is certain: Those considering a first home have a great opportunity to score their dream pad at a fraction of the cost. But while this sounds promising, most great deals usually come to an end. That is exactly what is happening to potential homeowners as banks start to introduce a series of new rules making owning not only harder, but saving near impossible.

Though property values in some of America’s largest cities have declined by as much as 9%, fees on new mortgages are projected to rise by as much as half a percent. Buying a home can still be one of the biggest investments you will make.

To prepare for this ever-changing housing market, here are a few tips for first-time home buyers in today’s market.

Make larger down payments to avoid fees

There is a reason that 28.8% of Americans are considering renting over buying this year. They are unable to cover the 22% down payment needed to avoid mortgage insurance and additional fees.

If you are torn between two homes, and the list price is close, consider if it falls within a price you can cover with a 20%-plus down payment. With tighter restrictions around lending money, being unable to cover this level of down payment can result in the need to purchase mortgage insurance. In the past few years, government-insured mortgages fees have rose, costing home buyers as much as 10% of the home price on a 30-year mortgage.

Build a strong credit score to save you thousands in interest

Did you know that applying for a home loan with weak credit can lead to higher interest fees (APR) and smaller loans? Leverage properties such as CreditKarma.com (free) or MyFico.com ($15.95) to know where your credit stands.

If you plan on applying for a home loan with your spouse, make sure both of your credit scores are strong, as the lender is subject to use the lower credit score. Start boosting your credit now by not applying for any additional credit. Try to break 740 for the best savings. When it comes time to apply for a loan, ensure you have very little debt with less than 1/3 of the credit being used.

According to FICO, a 100-point difference on your score could result in a $25,000 savings over a 30-year mortgage on a loan of $300,000.

Use 31% of your annual income toward your house

With banks now forcing down payments as much high as 22%, with scheduled monthly payments on top of that, saving becomes even more essential. It is also important not to forget closing costs ($3,500 average) and standard upkeep costs, which can run you as much as 3%.

But before you become super-frugal, take the time to get a sense of what you can afford. Calculate what you expect your down payment and future payments to be. From that point, plan on setting expectations to apply up to 31% of your before-tax income to your mortgage.

Plan for a long-term stay

The days of buying and flipping a home may be behind us, but that doesn’t mean you shouldn’t buy. Instead, make sure the house you choose is one you can see yourself in for a longer period of time. Knowing you may have to extend your time in your new home, try avoiding homes that need heavy renovations. You may not make the investment back or will have to wait even longer for the market to recover before you do.

Start saving today

Once you have determined how much you need to cover the initial and future cost, open a high-interest savings account at a national or local bank.

It is important that your budget is realistic and accurate. As I pointed out earlier, try for a higher down payment; this will help you avoid additional fees while locking into a lower interest rate.

Once you open a savings account rate, set up automatic transfers of funds to your home savings account. This way your savings will grow without you noticing the contribution being moved each week. Remember that it is easier to save by adjusting your spending habits than it is to make more money.

My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.

The role of technology is rapidly changing how the real-estate market functions in this country today. Gerharter Realtors is embracing these new mediums of communication to better serve our customers. We have created our e-family to better place important information in your hands to help you with your housing needs. As a part of Gerharter Enterprises we have access to a broader range of additional services and resources to better assist you. Visit me at my Web Site, Blog, Facebook, Twitter, You Tube or Pinterest. Please check out our helpful resources on Sellers Tips, Buyers Tips, Foreclosure Tips, and Mortgage Tips. For a personal consultation please visit our Office.

It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.

Email me at scott@gerharterrealtors.com.

3 comments:

  1. Indeed! When you're going to buy a new home for you or for your family. You need to be prepare for the house marketing. And these tips will surely help you on buying new home.

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